RBS's investment bank staff have six months to find new jobs

Royal Bank of Scotland is rapidly shrinking its investment bank. 14,000 jobs are said to be going, which equates to four out of every five positions. So, how many people have left in the first quarter? Hardly any.

Back in January, RBS said it employed 16,000-18,000 people in its investment bank in total - including all front, middle, and back office staff. RBS didn't reiterate this number when it announced its first quarter results today, but it did say that it employed 3,500 front office staff in its investment bank at the end of March. That's 200 fewer people than at the end of 2014 and 900 less than March 2014. If vicious cuts are happening already, they're clearly not happening in the front office.

This, it must be said, doesn’t suggest any sort of reprieve. What’s obvious from today’s presentation by CEO Ross McEwan and CFO Ewan Stevenson is that the pain is yet to come. Stevenson said that we won’t see any “material reductions in headcount” within RBS’s investment bank until the fourth quarter of 2015. That gives RBS's investment banking employees six months to find new jobs.

By the end of 2015, RBS plans to cut costs by £500m, a reduction of 14% on last year. However, Stevenson said revenues are likely to fall faster than costs are cut.

The obvious question is how RBS intends to divest those 14,000 employees. 75% of its staff occupy middle and back office functions, many of them in processing or offshore centres across Asia and Eastern Europe.

McEwan says that a “more fulsome discussion” on the progress of the investment banking shrinkage will be unveiled with the bank's second quarter results and that it will hold a “seminar” for analysts to give more detail during the summer. He did say that RBS is making “rapid progress” on the sales process of certain Asia operations and that the bank is “reviewing options” to reduce its global transaction services division within various European countries.

There are already signs that RBS's markets business is suffering.

Revenue in RBS’s investment bank was weighed down by £500m of litigation costs during the first quarter, primarily related to charges related to the foreign exchange market rigging. However, all of RBS’s business performed worse than this point last year, in contrast with most other investment banks.

While other banks cited rates as a strong area during Q1, RBS's rates business went from £359m in the first quarter of 2014 to £217m in Q1 2015. Like Citi, RBS also suffered in the turmoil following the removal of the Swiss franc peg, with FX sales and trading revenues at the bank falling 25% year-on-year during the first quarter.

Both rates and FX have been strong areas for RBS historically. In 2014, RBS's share of global FX trading fell to just 3.25% according to Euromoney. The British bank ranked eighth in the global rankings. In 2009, it ranked 4th.

RBS is giving its staff reason to leave before they're pushed. Compensation in the investment bank is falling. On a per head basis, RBS put aside an average of £51k ($78k) for its investment banking staff in Q1 2015 compared to £61k last year. Credit Suisse put aside an average of $81.5k in the first quarter, so RBS compares favourably, but Goldman Sachs paid $130k per head.